A few days ago, the rotation of cotton reserves in 2019 was successfully completed. Looking back at this round of cotton reserves, it lasted for 4 months from the listing on December 2, 2019 to the end of March 31, 2020. It was the first time it was launched 6 years after the temporary purchase and storage ended. The main purpose was to strengthen the central reserve cotton management, further optimizing the reserve structure and improving reserve quality.
Most companies reported that this round The design of the entry mechanism is more respectful of market rules, determines the starting price based on changes in domestic and foreign markets, and sets up a transaction suspension mechanism. While achieving the goal of optimizing the structure of the reserve cotton and improving the quality of the reserve cotton, it avoids the widening of the price difference between domestic and foreign cotton, and stabilizes the It has played an important role in the domestic market and protecting the interests of textile enterprises. Affected by the COVID-19 epidemic, the operating pressure of cotton textile enterprises has intensified this year. It is recommended to further improve relevant mechanisms, better utilize the role of cotton reserves, and improve the domestic market’s ability to resist risks.
The amount of cotton reserves planned for 2019.
2019 Annual Reserve Cotton Wheel Enter the actual trading volume and transaction rate.
The results of the rotation are in line with expectations
The planned purchase volume of this reserve cotton rotation was 786,000 tons, and the actual total transaction volume was 371,600 tons, accounting for 47% of the planned purchase volume. Among them, 359,100 tons were traded in mainland warehouses and 12,500 tons were sold in Xinjiang warehouses. In 2019, a total of 103 cotton reserves were transferred to storage companies. The top three companies in terms of transaction volume were China Cotton Group Langfang Storage and Transportation Co., Ltd., Aksulihua Xinchuang Cotton Industry Co., Ltd., and Chinatex Cotton International Trading Co., Ltd. A total of 25 storage repositories participated in the round.
This rotation has effectively optimized the national cotton reserve structure and improved the quality of the cotton reserves. Overall, the planned rotation volume of cotton reserves was first low and then high, and the trading volume changed with market changes. There are two main reasons for the substantial increase in planned rotation volume in the mid-to-late period: First, due to the impact of the new coronavirus epidemic after the year, all regions have postponed the resumption of work, downstream production is basically at a standstill, and cotton consumption has decreased; second, due to the impact of the new coronavirus epidemic abroad, Affected by various reasons such as the rapid spread and a more complex foreign trade environment, most companies are pessimistic about the market outlook, and domestic spot cotton prices have fallen sharply due to this impact. In order to stabilize cotton prices, boost market confidence, and balance supply and demand, the planned rotation volume has been significantly increased since the ninth week, from the initial planned rotation volume of 7,000 tons/day to 15,000 tons/day, and the daily planned volume will be increased from the 16th week The incoming volume reaches 20,000 tons.
During the rotation period, the enthusiasm of cotton-related enterprises for delivery and storage changes with changes in cotton prices and domestic and foreign economic situations. In December 2019, the production and operation rhythm of my country’s cotton textile enterprises was stable, and the willingness to replenish stocks near the end of the year was slightly stronger than usual. Cotton prices were relatively strong, and cotton-related enterprises were more inclined to sell to textile enterprises; with the outbreak of the new coronavirus pneumonia, The market is sluggish, risk aversion has risen sharply, and the enthusiasm of the central bank has increased significantly.
The pricing mechanism respects the market
This round adopts a market-based pricing mechanism for the first time, setting a maximum price and downward bidding based on a certain proportion of the market price. This not only leaves an appropriate amount of bidding space for the delivery companies, but also ensures that the delivery Storage companies’ transportation costs and other costs. In the eighth week (January 19th to 23rd), the maximum price for reserve cotton incoming bidding reached a maximum of 14,197 yuan/ton, the cumulative average transaction price was 13,089 yuan/ton, the highest transaction price was 14,197 yuan/ton, and the lowest transaction price was 11,550 yuan/ton. Yuan / ton. During this rotation, the average price of the National Cotton Price B Index (CNCotton B) representing the price of 3128B grade cotton was 13,133 yuan/ton, which was basically the same as the average transaction price of the rotation. It can be seen that the rotation pricing mechanism fully demonstrates the principle of marketization and maintains the normal order of the market.
The linkage between this cotton reserve rotation and domestic and foreign cotton prices has been significantly enhanced, and risks can be effectively controlled. In the middle and late stages of this cycle, during the outbreak of the COVID-19 epidemic, cotton prices at home and abroad have fluctuated downwards, and the market-based pricing mechanism has supported domestic cotton prices to a certain extent. During the rotation period, the average domestic and international price difference was 295 yuan/ton, which was significantly lower than during the non-rotation period. Most companies have a positive attitude towards the setting up of this internal and external linkage mechanism.
In addition, the circuit breaker mechanism introduced this time has been recognized by many textile companies. According to the regulations of relevant national departments, during the rotation transaction period, when the domestic cotton price is higher than the international cotton price (based on 1% tariff) by 800 yuan/ton for 3 consecutive working days, the rotation transaction will be suspended from the 4th working day. During this rotation, because the price difference between domestic and foreign cotton exceeded 800 yuan/ton for three consecutive working days, two trading suspensions were triggered, respectively at the end of February (trading was suspended for 2 days) and in mid-March (trading was suspended for 1 day). The price difference falls back and the cycle starts again. The circuit breaker mechanism designed for this rotation and linked to international market prices avoids the problem of increasing domestic and foreign price differences due to domestic rotation. It not only stabilizes domestic cotton prices, but also ensures the international competitiveness of domestic textile enterprises.
Return to normalcy and protect cotton
Data show that during the trading period, there was no transaction for 12 consecutive days from December 27, 2019 to January 14, 2020. China Cotton Textile Industry Association conducted a survey on cotton traders and cotton spinning enterprises in response to this situation. Cotton traders said that there are many reasons for the low transaction, mainly including the following three points: First, since December 27, 2019, the maximum price for reserve cotton rotation bidding has been lower than the cotton futures price, and the price is not attractive; second, because The second public inspection increased the uncertainty of cotton indicators and reduced the willingness to deliver; third, the quality premium of cotton for delivery was lower than the premium for futures and other reasons, which affected the enthusiasm of cotton-related companies for delivery.
Cotton spinning enterprises put forward several suggestions for the rotation of cotton reserves: First, while rotating into Xinjiang cotton, they hope to rotate into For some high-quality imported cotton, it is hoped that the reserve cotton will continue to be rotated out in 2020 to normalize the rotation in and out of the reserve cotton; secondly, for this rotation, the conditions for secondary public inspection will be appropriately relaxed, and within a certain tolerance range, for non-malicious people Defaulting enterprises are allowed to replace their sub-standard cotton or receive premiums and discounts according to the tolerance, reducing the burden on storage enterprises and reducing resource waste; the third is to improve the rotation mechanism. In terms of pricing methods, rotation time, etc., we design plans to deal with extreme market conditions and can flexibly adjust them according to the development of the situation. The fourth is to strictly prevent “black box” operations, ensure the openness and transparency of cotton reserve rotation, establish an industry “blacklist” and joint disciplinary system, especially increase punishment for companies that engage in fraud in reserve cotton transactions, and create honesty, trustworthiness, fairness and mutual trust. The market environment; fifth, during the rotation period of cotton reserves, the reported reserves cannot be included in the national reserves. </p
